UAE corporate profit tax 9% explained
Business services in Dubai
Big news for businesses in the UAE: The government announced a new 9% corporate tax starting June 2023! Don't worry, it's one of the lowest in the world and aims to bring the UAE in line with international standards.
Here's the breakdown:
-
9% tax on most businesses: Unless you're a big multinational earning over €750 million (different rules there!), expect a 9% tax on your profits.
-
Public consultation happening now: The government is asking for your feedback! Share your thoughts by May 19th, 2022.
-
Need help navigating this change? Al-Jazat is here! We can answer your questions, assess your business, and get you ready.
We've also got answers to some common questions:
-
Does this apply to my small business? Probably! Unless you fall under the specific exemptions, the 9% tax will likely apply.
-
How will this affect my bottom line? It depends on your profits, but the 9% tax is designed to be minimal compared to other countries.
-
What do I need to do now? Stay informed! Talk to experts like Al-Jazat, and keep an eye out for updates from the government.
Remember: This is a new chapter for businesses in the UAE, but it doesn't have to be scary. With the right information and support, you can adapt and thrive!
Who will pay UAE corporate tax
The UAE is introducing a new corporate tax, but don't worry, it's not for everyone! Here's the scoop on who needs to pay and who gets a free pass:
You'll pay the new 9% tax if:
-
You're a business or individual with a commercial license (or similar permit).
-
You made more than AED 375,000 (around $102,700 USD) in profits from your UAE mainland activities.
This means whether you're a mainland company or a free zone entity, if your mainland profits crossed that threshold, you're in.
But fear not, some are exempt! You won't pay if you're:
-
A government entity or public institution.
-
A fully government-owned company with special duties.
-
In the natural resources extraction business.
-
A charity or public benefit organisation.
-
A social security or retirement fund.
-
A qualified investment fund (with some conditions).
Feeling unsure? No problem!
Talk to a tax advisor or consultant. They can help you understand if you need to pay and navigate the new tax system smoothly.
Remember, this is just a starting point. The UAE is still fine-tuning the details, so stay informed and seek professional advice if needed. With the right planning, you can adapt and keep your business thriving in the new tax landscape!
UAE corporate tax for free zones
Running a business in a UAE free zone? Here's the good news: You can still enjoy those sweet tax-free benefits, but with a few conditions:
Free Zone Freedom:
-
As long as you don't do business with UAE mainland companies or your mainland income is below AED 375,000, you're tax-free!
-
Passive income like dividends, royalties, or interest from the mainland remains tax-free too.
-
Supplying goods to the mainland from specific "VAT-designated zones" within your free zone? No tax worries there!
But Wait, There's More:
-
If you have a branch in the mainland, that branch will be taxed at the regular 9% rate on its mainland income.
-
You'll need to file a tax return even if you're tax-exempt.
Bonus Option:
-
Want to opt into the regular 9% tax rate? You can choose to do so if it benefits your business.
Remember, This is a new system, so stay informed and consult a tax advisor if needed. They can help you navigate the specifics and ensure you're maximising your tax benefits!
So, keep calm and free zone on! With careful planning and expert advice, you can continue to thrive in the UAE's evolving tax landscape.
Profit tax for UAE Mainland
The UAE is introducing a new corporate tax, but fear not, it mostly targets mainland companies operating and earning profits within the UAE. Here's the lowdown:
Who Pays:
-
This 9% tax applies to mainland companies making profits within the UAE.
-
If your profits stay below AED 375,000, you're in the clear!
What it Means:
-
This tax affects your locally earned profits, not your total income.
-
So, if you have a mainland company doing business in the UAE, be prepared to pay 9% on those profits exceeding the threshold.
Remember:
-
This is a new system, so stay informed and talk to a tax advisor if needed.
-
They can help you understand your specific situation and ensure you're compliant.
With planning and the right guidance, you can adapt and keep your mainland business thriving in the new tax landscape!
Tax for UAE offshore companies
Thinking of setting up an offshore company in the UAE? Great choice! Here's the perk you'll love: no corporate profit tax!
That's right, companies like JAFZA offshore and RAK offshore are exempt because they can't do business within the UAE itself. It's like having a sweet, tax-free island for your international ventures.
So, if you're looking for a base for your global operations with the added benefit of tax exemption, consider a UAE offshore company. Just remember, the fun stops if you start doing business within UAE borders.
Is accounting mandatory in UAE?
The UAE's new corporate tax is coming, and it's important to be prepared. Here's a simplified guide to help you navigate the key requirements:
Accurate Records are Key:
-
All UAE companies need audited financial statements following international standards. Think of it as having a clean bill of financial health.
-
Proper bookkeeping is crucial! This helps justify your profits and income sources, making tax return filing a breeze.
-
Every transaction needs a paper trail. Invoices, contracts, and other documents are your tax-time best friends.
Calculating Your Taxable Income:
-
The starting point is your accounting profit/loss. Consider it the foundation for your tax calculations.
-
The tax year typically follows the Gregorian calendar. Make sure your records align with that.
-
Interest expense deductions have a limit: 30% of your EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation).
-
Entertainment expenses are only partially deductible, with a cap of 50%. Remember, work hard, play (and deduct) responsibly!
Remember:
-
This is just a summary. Consult a tax advisor for personalised guidance.
-
Staying informed is key! Keep an eye out for official updates and announcements.
With the right preparation and expert advice, you can ensure a smooth transition into the new tax era. So, roll up your sleeves, get organised, and conquer your tax goals!
Do companies need to file tax returns?
Mark your calendars, UAE businesses! Starting June 2023, things are changing with taxes:
Registering with the FTA:
-
Every company, whether tax-paying or not, needs to register with the Federal Tax Authority (FTA). It's like getting your official tax ID.
Filing Tax Returns:
-
Get ready to submit annual tax returns online through the FTA portal. Even if you don't owe any tax, filing is mandatory.
-
You'll have nine months after the tax year ends to submit your return and pay any dues. So, plenty of time to get things in order!
Asking for Help:
-
Unsure about anything? No problem! The FTA is there to assist. Reach out for clarifications on tricky tax situations.
Relax, No Advance Payments:
-
Good news! You won't need to make any advance tax payments. Just focus on your annual return and payment.
Remember:
-
This is just a simplified overview. For specific details and personalised guidance, consult a tax advisor.
-
Stay informed! Keep an eye out for official updates and announcements from the FTA.
With the right preparation and support, navigating the new tax system can be smooth sailing. So, breathe easy, get informed, and be ready to file your first return confidently!
Can companies offset their losses?
Running a business comes with ups and downs, and sometimes those downs mean losses. But in the UAE, there's good news! You can use those past losses to your advantage with tax loss carryovers.
Here's the deal:
-
Offset past losses: Up to 75% of your current taxable income can be reduced by offsetting it with losses from previous years. Think of it as using past pain to ease your current tax burden.
-
Carry them forward: If at least half your shareholders stay the same, you can carry those losses forward indefinitely. So, those tough times won't haunt you forever!
-
New ownership? No worries: Even with new owners, you can still carry forward 50% of your losses, as long as the business stays similar. Continuity matters!
Remember:
-
This is a simplified explanation. Consult a tax advisor for specific details and calculations.
-
Rules may differ based on things like shareholding structures and business activities.
Feeling lost? Relax! With proper planning and expert guidance, you can utilise loss carryovers effectively and navigate the UAE tax system with confidence. So, keep calm, carry on, and remember, past losses don't have to define your future success!
Are there any income taxes in the UAE?
The UAE's reputation as a business-friendly hub holds true with its sweet suite of tax benefits:
-
No personal income tax: Breathe easy, your salary stays yours! (Unless you run a business, see below.)
-
Real estate windfalls? Tax-free!: Rent out your property or sell it for a profit, taxman won't come knocking.
-
Investment income? All yours: Dividends, stocks, and other investments grow freely, tax-free.
-
Selling assets? Keep the gains: No capital gains tax to eat into your profits.
-
Dividends flowing in? No tax stopover: Enjoy the full amount, no deductions here.
-
Moving money around? No sweat: Transfer funds locally or internationally without tax worries.
But wait, there's more! While these perks are amazing, remember:
-
Running a business? Corporate tax applies: If you have a commercial licence, the 9% corporate tax kicks in.
-
Stay informed: This is a new system, so keep an eye out for updates and consult a tax advisor for personalised guidance.
Overall, the UAE remains a tax haven for many, offering significant advantages for individuals and investors. Just be mindful of the exceptions and seek professional advice if needed. So, enjoy the tax-friendly environment, focus on your business goals, and prosper in the UAE!
Will group companies pay tax separately?
Running multiple companies in the UAE? Tax season can feel like a juggling act. But what if you could treat all your companies as one for tax purposes? That's where group taxation comes in, and it's good news!
Here's the deal:
-
One Big Happy Taxpayer: If your companies share at least 95% ownership, you can file a single tax return for the entire group. Imagine, no more juggling individual returns!
-
Sharing is Caring: Got a company making losses? No worries! Offset those losses against the profits of other companies in your group (with at least 75% common ownership).
-
But Remember: Not everyone qualifies. Your companies need to be UAE tax residents and share the same financial year and accounting standards.
Feeling lost? A tax advisor is your best friend here. They can help you:
-
Understand the rules: Check if your group qualifies and see if group taxation makes sense for you.
-
Navigate the paperwork: Filing a single return sounds simpler, but there are still formalities involved.
-
Maximise your benefits: Who doesn't want to pay less tax? A tax advisor can help you optimise your group structure for tax efficiency.
So, don't go it alone! With group taxation as an option and expert guidance, managing your UAE businesses' taxes can be smooth sailing. Now, go forth, conquer your business goals, and remember, tax time doesn't have to be a headache!
What is transfer pricing in UAE?
Running a business with multiple parts or international operations? Then transfer pricing is something you need to understand. It's basically the price you charge when goods or services move within your company, like between departments or subsidiaries.
Here's the catch: some companies used transfer pricing to pay less tax by setting artificially low prices. But the UAE doesn't like that!
The new law says:
-
Your transfer prices gotta be fair and similar to what unrelated companies in the region would charge.
-
If you're dealing with related parties, you need to do some extra paperwork: fill out a form, keep records, and maybe even a special report.
-
Don't worry, the old rules still apply too (those are called CbCR).
Confused? Don't fret! This is new for everyone. If you have questions about transfer pricing or anything else related to the new UAE corporate tax, reach out to us. We're here to help you understand the changes and get your business ready for the new tax landscape.
Remember, we're all in this together! So let's navigate this smoothly and keep your business thriving.
FAQ
Q: How much is UAE corporate tax?
A: UAE corporate tax is 9% from the taxable profits. Taxable profits are those generated from the business with UAE Mainland.
Q: Are dividends taxable in the UAE?
A: No. Dividends and capital gains are tax free in the UAE.
Q: When will the UAE start corporate taxation?
A: UAE corporate tax will be implemented from 1 June 2023.
Q: Will all corporate profits be taxable in the UAE?
A: No. Only the following category of profits will be taxable:
Profit generated from business with UAE Mainland companies that is exceeding 375,000 AED (102,700 USD)
Q: My free zone company works with other free zone companies. Do I have to pay UAE corporate tax?
A: No, if you do not conduct business with UAE Mainland, you are not liable to pay corporate tax.
Q: I have a free zone company. Do I have to pay 9% corporate tax?
A: It depends where you generate your profits. If profits are generated from UAE Mainland, you will need to pay 9% from the profit amounts over 375,000 AED.
If you generate profits out of the UAE, you do not have to pay UAE corporate tax.
Q: Do I have to keep the books and do accounting of my business in the UAE?
A: Yes, bookkeeping according to international financial standards is required for all UAE companies.
Q: I am not conducting business in the UAE and not having any profits from the UAE Mainland. Do I need to file annual tax returns?
A: Yes, you will have to register and file annual tax returns even if you do not generate any profits in the UAE.
Q: I am employed in the UAE. Do I have to pay tax from my salary?
A: No. The UAE is still free from any income tax.